Cross-border Electricity Trade Research Articles

Applying trade mechanisms to quantify dynamic GHG emissions of electricity consumption in an open economy - The case of Switzerland

Quantifying greenhouse gas (GHG) emissions from electricity consumption presents a significant challenge due to the variable nature of the generation mix throughout the year and the complex dynamics of cross-border electricity trade. In this paper, we introduce an innovative methodology designed to accurately capture the hourly GHG emissions linked to electricity imports, and thus electricity consumption. Contrary to conventional approaches, our methodology identifies the relevant generation technologies in exporting countries which are activated for export. This selection is based on (i) the classification of the technologies according to their dispatch cost (merit order), and (ii) considers trade mechanisms from economic theory.We apply this methodology to Switzerland, a country characterized by a low-carbon electricity generation mix, which however heavily relies on imports from neighbouring countries, particularly during the winter months. Over the period from 2017 to 2021, we find that 88 % of Switzerland's domestic electricity demand is met by its own generation—primarily hydro and nuclear—while the remaining 12 % is imported, mainly from fossil-fuel-based sources. Consequently, the average annual GHG emission factor for electricity consumption in Switzerland is 98 g-CO2eq/kWh, with 29 % attributed to domestic generation and 71 % to imports. This figure is 40 % higher than the 70 g-CO2eq/kWh estimated using a conventional approach, which typically underestimates the specific impacts of electricity imports.The disparity between these approaches becomes even more pronounced when considering the seasonal and hourly variations in the electricity mix and the resulting emission factors. These insights are particularly crucial in the context of emerging electricity demands, such as heat pumps and electric vehicles, where accurate GHG accounting can significantly influence policy and investment decisions.

Impacts of Cross-Border Electricity Trade on Local Livelihoods in Nong Khai, Thailand

Impacts of Cross-Border Electricity Trade on Local Livelihoods in Nong Khai, Thailand

Finding opportunity in economic power dispatch: Saving fuels without impacting retail electricity prices in fuel-producing countries

In many oil- and natural gas-producing countries, fuels are allocated to the electricity sector at administratively set prices below international market prices for domestic policy reasons. This article shows that dispatching power units based on the opportunity costs of domestically used fuels can yield significant efficiencies, while end-user electricity prices can continue to reflect administratively set fuel prices. In addition, opportunity cost dispatch can bring environmental benefits when it results in switching the priority of oil and gas units in the merit order and facilitating investments in renewable energy. Therefore, this approach can support long-term net-zero emission targets. It can also resolve cross-border electricity trading issues faced by fuel-rich countries, which are reluctant to base their electricity exports on domestic fuel prices.

Are West Africa's policy, planning, and regulatory frameworks missing the harmonization piece of the power pooling-renewable energy puzzle?

Sound policy, planning and quality regulation are cornerstones to co-creating national markets conducive to the implementation of an efficient regional electricity market. This study examines the policy, planning and regulatory substance and processes in the West African Power Pool, focusing on four countries, namely Burkina Faso, Côte d’Ivoire, Ghana, and Mali. Through its specialized institutions, the region seeks to leverage shared resources and complementarities to scale up sustainable electricity generation and enhance cross-border electricity trade. The study, however, reveals half-hearted renewable energy (RE) policies, weak RE investment planning and inconsistent regulation on the one hand, and on the other hand, a lack of harmonization of regulatory frameworks which are often misaligned with the regional vision. This translates into missed opportunities to attract the necessary investments in sustainable power infrastructure, particularly from the private sector, and to mutually develop a regional market capable of tackling the long-standing challenge of access to reliable and affordable electricity amid the climate crisis. This can be reversed if countries are fully committed and duly equipped to improve their policies and planning processes, and adjust and harmonize their regulatory frameworks under the guidance, support, and leadership of the regional entities.

A composite indicator-based method to assess the energy security of Nepal and prospects of cross-border electricity sharing in South Asia

Scholars recommend country (or region) specific energy security indices capable of adequately considering local specificities in the absence of a ‘universal’ index. Such an index is not available for Nepal. Hence, this study is the first to develop the Energy Security Composite Index of Nepal (ESCOIN), applying a comprehensive indicator-based approach to quantify energy security (ES) of Nepal. We build upon the notion that a country is able to trade energy when it is energy secure. We quantify Nepal's energy security and qualitatively assess the prospect for regional power trade in South Asia. A long list of 77 indicators is compiled from an extensive review of international literature. Based on the context, applicability to Nepal, data availability and conditions of multi-collinearity, this list of indicators is narrowed down to 21. Principal Component Analysis is then applied to evaluate the importance of the components for ESCOIN. Our results show that Nepal has consistently held a boundary position between “moderate” to “high” classes of ES in the last decade. We identify key reasons for this. First, the country's domestic sector is over-reliant on traditional fuels (dry-dung, firewood and agricultural residues). Second, Nepal faces a problem of suppressed demand in the absence of energy-intensive development activities in all productive sectors of the economy. Third, the growth in the energy demand is met only marginally by domestic hydropower and other renewables, and largely by increasing imports. Hence, we surmise a ‘pseudo energy secure’ state for Nepal. Although efforts are underway, electricity trade with China, Bangladesh and other South Asian Association for Regional Cooperation (SAARC) countries is economically difficult and technically challenging. Hence, cross-border electricity trading, particularly with India, can be seen as an opportunity for Nepal provided considerable infrastructural development occurs, institutional capacity is strengthened, and genuine political commitment and trust are sustained. Moreover, Nepal should focus on achieving self-sufficiency in energy through domestic hydropower and renewable sources and aim to stabilize energy consumption rather than being overly ambitious of exports, at least in the near future.

Modelling flexibility requirements in deep decarbonisation scenarios: The role of conventional flexibility and sector coupling options in the European 2050 energy system

Russia's invasion of Ukraine has reaffirmed the importance of scaling up renewable energy to decarbonise Europe's economy while rapidly reducing its exposure to foreign fossil fuel suppliers. Therefore, the question of sources of flexibility to support a fully decarbonised European energy system is becoming even more critical in light of a renewable-dominated energy system. We developed and used a Pan-European energy system model to systematically assess and quantify sources of flexibility to meet deep decarbonisation targets. The electricity supply sector and electricity-based end-use technologies are crucial in achieving deep decarbonisation. Other low-carbon energy sources like biomethane, hydrogen, synthetic e-fuels, and bioenergy with carbon capture and storage will also play a role. To support a fully decarbonised European energy system by 2050, both temporal and spatial flexibility will be needed. Spatial flexibility, achieved through investments in national electricity networks and cross-border interconnections, is crucial to support the aggressive roll-out of variable renewable energy sources. Cross-border trade in electricity is expected to increase, and in deep decarbonisation scenarios, the electricity transmission capacity will be larger than that of natural gas. Hydrogen storage and green hydrogen production will play a key role in providing traditional inter-seasonal flexibility, and intraday flexibility will be provided by a combination of electrical energy storage, hydrogen-based storage solutions (e.g., liquid H2 and pressurised storage), and hybrid heat pumps. Hydrogen networks and storage will become more critical as we move towards the highest decarbonisation scenario. Still, the need for natural gas networks and storage will decrease substantially.

Effect of Combining Carbon Policies and Price Controls in Cross-Border Trade of Energy on Renewable Generation Investments

In this paper, we investigate the combined effect of carbon policies and price controls in cross-border trade of electricity on power generation investments. It has been shown that price controls in cross-border trade of electricity may negatively affect renewable energy investments. However, the assessment of the impact of the simultaneous adoption of carbon policies and energy price controls has still not been addressed. Assessing this interaction is important to find out whether carbon policies can offset the negative impact of price controls on renewable energy investments or not. Results show that carbon policies can partially offset the negative impact of price controls, and that cap-and-trade programs are more effective to prevent this negative impact than carbon taxes. On the other hand, high levels of carbon taxes combined with price control regulation may increase renewable capacity investments, but without completely offsetting the negative effect of the price controls.

Identifying drivers and mitigators for congestion and redispatch in the German electric power system with explainable AI

The transition to a sustainable energy supply challenges the operation of electric power systems in various ways. Transmission grid loads increase as wind and solar power is often installed far away from the consumers. System operators resolve grid congestion via countertrading or redispatch to ensure grid stability. While some drivers of congestion are known, the magnitude of their impact is unclear, and other factors might still be unidentified.In this study, we conduct a data-driven investigation of congestion in the German transmission grid that reveals drivers and mitigators and quantifies their impact ex-post. Specifically, we used Gradient Boosted Trees and SHAP values to develop an explainable machine learning model for the hourly volume of redispatch and countertrade. As expected, wind power generation in northern Germany emerged as the main driver. Cross-border electricity trading, especially with Denmark, also plays an important role. German solar power has very little effect. Furthermore, our results suggest that run-of-river generation in the alpine region has a strong mitigating effect. Our results support the idea that market design changes, e.g., a bidding zone split, could contribute to congestion prevention.

Integrated analysis of end-use electrification and cross-border electricity trade policies for hydropower enabled energy transformation in Nepal

Whether an enormous untapped hydropower resource should be utilized domestically by heavily electrifying energy end-uses or should be exported to neighboring countries is often debated in Nepal. This study attempts to bring both policy options together and justifies with evidence the need to integrate end-use electrification and cross-border electricity trade policies in the energy transformation of Nepal. We found out that Nepal will continue to import electricity till 2027 to meet its electricity demand throughout the year though it has already started exporting its surplus electricity during the wet season because of the full availability of run-of-river type hydropower. The run-of-river will continue to dominate Nepal's least-cost generation mix with a two-thirds share resulting in considerable surplus electricity during the high-flow season. Such surplus will exceed one-third of its total energy generation capacity in long-run in all end-use electrification scenarios (low to high). Nepal can use its existing cross-border electricity trade mechanism to sell its surplus electricity and can generate revenue of 67 billion USD in the high electrification scenario, which, combined with savings from fossil fuel import savings, can provide 85 % of total electricity generation investment needs.

Prediction of Electricity Trade Partners Based on the Network Theory: The West Asia Community

This study aims to predict electricity cross-border trade partners based on the network theory and to investigate the position and importance of West Asia community in the global electricity trade network. For this purpose, the global network is constructed to examine the role of each node in the network for the time period of 2010–2018. Different communities are identified to proceed with the network analysis. The innovative analysis is link prediction to forecast missing links from the network. The results suggest more interconnectedness among community members, especially Iran, Turkey and Russia, which are the prominent nodes in the community. The link prediction outcomes offer the most probable missing links from the community and lead us to select the common neighbour approach as the most efficient method. JEL Codes: D85, Q27

Harnessing solar and wind for sustainable cross-border electricity trade in the Greater Mekong Subregion

Sustainable, low-emission electricity generation options are needed in the Greater Mekong Subregion, including for cross-border electricity trade. Large-scale investment in solar and wind power, together with off-river pumped hydro energy storage, is identified as a promising way forward. The GMS has many potential off-river pumped hydro sites. Actionable recommendations include greater use of bilateral power purchase agreements for cross-border solar and wind power supply, and potential development of a high-voltage direct current grid. Institutional prioritization and ongoing evaluation are required to ensure desired social, environmental, and economic outcomes from the transition.

Erratum to “Toward a fundamental understanding of flow-based market coupling for cross-border electricity trading” [ADAPEN 2 (2021) 100027

Erratum to “Toward a fundamental understanding of flow-based market coupling for cross-border electricity trading” [ADAPEN 2 (2021) 100027

Analysis of generation investments under price controls in cross-border trade of electricity

Price controls are commonly employed in Latin America and other regions to prevent price increases in exporting regions during cross-border trade of electricity. This paper introduces a methodology to evaluate the economic impact of price controls on generation investments, dispatch decisions, and carbon emissions in the context of cross-border electricity trade. We propose a non-linear adjusting function to represent a price-control rule, which can be incorporated into equilibrium models for generation firms and price-sensitive consumers. By employing fixed-point iterations between the adjusting function and an optimization problem that determines equilibrium investments and dispatch decisions for generation firms in a competitive environment, we obtain an equilibrium solution. We apply the proposed methodology to analyze the current price controls governing cross-border electricity trade between Chile and Argentina, with a focus on the exporting country. Our findings reveal that existing price controls can impede incentives for renewable energy investments, particularly in wind and solar, while stimulating investments in fossil fuel-based generation capacity. Moreover, these controls lead to increased CO2 emissions compared to a scenario without price controls. Additionally, we observe that the inefficiency resulting from price controls is proportionate to the volume of exports relative to local demand and the price elasticity of demand in the importing region.

Subsidy removal, regional trade and CO2 mitigation in the electricity sector in the Middle East and North Africa region

This study analyzes the impacts on the power sector in the Middle East and North Africa region of three policies: removal of fuel subsidies, enhanced cross-border electricity trade, and a cap on carbon dioxide emissions. The analysis uses a power system planning model that minimizes the total electricity supply cost over 2018–2035 by satisfying specified technical, economic, environmental, and policy constraints. The study shows that the region would save between US$26.3 billion and US$27.5 billion, measured in 2018 prices, by removing subsidies to natural gas used for power generation. Cross-border electricity trade would save US$83.6 billion to US$90.9 billion. The two policies together would yield a reduction of 10 percent in cumulative power-sector CO2 emissions in the region, with a net cost savings of US$111 billion. If a carbon emission-constraining policy is considered to achieve the same level of emissions reduction, the power supply costs will increase by US$97 billion. The study also reveals that the removal of fossil fuel subsidies and expanded cross-border electricity trade significantly complement each other and also to achieve climate change mitigation targets in the MENA region.

The Cost of Carbon Leakage: Britain’s Carbon Price Support and Cross-border Electricity Trade

Carbon taxes create global benefits unless offset by increased emissions elsewhere. An additional carbon tax in one country may cause leakage through imports and will also increase costs by creating a wedge between economic marginal costs in different markets, causing an offsetting deadweight loss. We estimate the global benefit, carbon leakage and deadweight cost of the British Carbon Price Support (CPS) on GB’s cross-border electricity trade with France and The Netherlands. Over 2015–2020 the unilateral CPS created €72넠 m/yr deadweight loss, about 31% of the initial economic value created by the interconnector, or 2.5% of the global emissions benefit of the CPS at €2.9±0.1 bn/yr. About 16.3±3.5% of the CO2 emissions reduction is undone by France and The Netherlands, the monetary loss of which is about €584±127 m/yr.

Economic Prospects of Cross-Border Electricity Trade Between Nepal and India

This study focuses on exploring the economic opportunities and potential challenges of cross-border electricity trade between Nepal and India. The main focus is on the transmission infrastructure, economic prospects, regulatory frameworks, and challenges involved. The study was conducted through secondary data analysis and descriptive research methods, to explore the strategic importance of electricity trade for Nepal, considering its abundant hydropower potential and geographical advantages. The existing transmission lines, infrastructure, and the role of private sector involvement in facilitating trade were examined. Moreover, the study discussed the seasonal demand variations between the two countries and the regulatory hurdles that need to be addressed for successful trade implementation. The finding highlights the potential economic benefits of electricity trade and emphasizes the need for clear guidelines, infrastructure development, and effective cooperation to overcome challenges and maximize trade’s positive impacts on economic growth and trade balance between India and Nepal.

Renewable energy proliferation for sustainable development: Role of cross-border electricity trade

Electricity production is intrinsically linked to economic development. Energy is a necessity but fossil fuel-based energy sources, which are still globally predominant, are detrimental to the environment. Renewable energy offers a better alternative, but there are multiple barriers to its proliferation. Intermittency and reliability issues are a couple of major barriers to the growth of renewable energy. One strategy promoting renewable energy growth is to enhance cross-border electricity trade (CBET). In addition to addressing intermittency and reliability issues, CBET offers a larger market for the renewable energy. The paper tests these hypotheses and finds considerable empirical support for the same. A clear causal linkage has been found from CBET to renewable energy generation. We have applied nonparametric regression to establish the association between CBET and renewable energy generation. The method is less restrictive in the sense that no a priori functional form is assumed for the sought relationship. Having established the affirmative role of CBET in boosting renewable energy generation, we advocate for concerted policy intervention by trading partners to overcome the barriers promoting CBET. This should help in achieving sustainable development goal of affordable and sustainable energy for all.

Seasonality and trade in hydro-heavy electricity markets: A case study with the West Africa Power Pool (WAPP)

Hydroelectric power plants account for 25% of West Africa's total installed electricity generation capacity. In general, electricity generated by these plants is seasonal, and intra-annual fluctuationshave a considerable impact on electricity supply and cross-border electricity trade. This study soft-links a global hydrologic model to a multi-region capacity expansion and planning model for the West Africa Power Pool (WAPP) to examine the effects of seasonality in hydropower electricity generation on electricity trade as well as the economic benefits of unconstrainedcross-border electricity trade. Transitioning from a rainy to a dry season decreases hydroelectricity generation by an average of 40% in a typical year. Between 2018 and 2050, satisfying the region's electricity demand will require significant capital investment; nevertheless, extending from current bilateral electricity trade agreements to a fully competitive cross-border electricitytrade will result in net annual savings of $3 billion in 2015 dollars. To achieve year-round energy security, countries should plan to diversify their energy sources to ensure that supply reliability can be maintained in the event of lower supply during the dry season. This study represents a novel examination of seasonality impacts on hydropower modeling and may serve as a test case to inform future modeling efforts in other regions.

Decision model for cross-border electricity trade considering renewable energy sources

Substantial benefits can be achieved from electricity trade through the interconnection of electricity networks of neighboring countries. In this study, we introduce a regional electricity exchange model to obtain an optimal power trade level between electrically-interconnected countries. In addition, producing clean electricity is one of the primary goals of many countries. Moreover, electricity production can be optimized in some areas using renewable sources and exported to regions with high demand. Thus, the power exchange using the proposed method and framework is investigated. Additionally, a decision model for planning an optimal configuration of hybrid wind/solar power systems and optimal electricity trade is presented. We analyze the economic, engineering, management, and policy issues to facilitate optimization of power generation and trade at the country level and quantify the gains from the increased trade. The proposed decision model is employed to plan electricity trade considering hybrid wind and solar energy resources. Furthermore, the effectiveness of reducing the variability of hourly power supply is evaluated by integrating the wind and solar power generation technologies. The main decision variables are the power trade value and number of installed wind turbines and solar systems. In case studies, the computational results using the proposed model yielded an optimal power trade between Iran and its neighboring countries, including Turkey, Turkmenistan, Afghanistan, Pakistan, Azerbaijan, Armenia, and Iraq. Consequently, Iran can export a maximum power capacity of 5,300 MW to its neighbors, where Iraq receives the highest share of 2,000 MW. When the electricity demand in Iran is high, Turkey, Turkmenistan, Azerbaijan, and Armenia can export 1,200, 1,000, 80, and 100 MW of electricity to Iran, respectively. Finally, various configurations of a hybrid wind/solar power generation system considering various cost and power supply variations are presented to partly supply the load requirements of the traded electricity. Consequently, Iran can supply 20% of the total demand of the electricity trade by wind and solar system installed capacities of 316.5 and 267 MW, respectively.

Analyzing the techno-economic role of nuclear power in the Dutch net-zero energy system transition

To analyze the role of nuclear power in an integrated energy system, we used the IESA-Opt-N cost minimization model focusing on four key themes: system-wide impacts of nuclear power, uncertain technological costs, flexible generation, and cross-border electricity trade. We demonstrate that the LCOE (levelized cost of electricity) alone should not be used to demonstrate the economic feasibility of a power generation technology. For instance, under the default techno-economic assumptions, particularly the 5% discount rate and exogenous electricity trade potentials, it is cost-optimal for the Netherlands to invest in 9.6 GWe nuclear capacity by 2050. However, its LCOE is 34 €/MWh higher than offshore wind. Moreover, we found that nuclear power investments can reduce demand for variable renewable energy sources in the short term and higher energy independence (i.e., lower imports of natural gas, biomass, and electricity) in the long term. Furthermore, investing in nuclear power can reduce the mitigation costs of the Dutch energy system by 1.6% and 6.2% in 2040 and 2050, and 25% lower national CO2 prices by 2050. However, this cost reduction is not significant given the odds of higher nuclear financing costs and longer construction times. In addition, with 3% interest rate value (e.g., EU taxonomy support), even high cost nuclear (10 B€/GW) can be cost-effective in the Netherlands. In conclusion, under the specific assumptions of this study, nuclear power can play a complementary role (in parallel to the wind and solar power) in supporting the Dutch energy transition from the sole techno-economic point of view.